China’s Car Market Shrinks Again

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Car markets rise and fall everywhere. That wasn't so in China, where sales rose strongly year after year, until 2018. Now it's happening again.

Car markets rise and fall everywhere. But for 20 years that wasn’t true in China, where sales rose strongly year after year.

The party ended in 2018. Retail sales in the country skidded 4% to 23.7 million units, according to the China Assn. of Automobile Manufacturers. (U.S. car sales advanced 1% to 17.3 million last year.)

Deliveries for 2019 are heading for a 10% decline. What’s going on? Much of the blame goes to the same factors that caused last year’s slump: a cooling economy and continuing uncertainty among consumers and businesses.

This year, sales also are being depressed by the industry’s switch to tougher air pollution standards, which are being rolled out irregularly on a region-by-region basis.

At the same time, the government has been pulling back on sales incentives for hybrid and all-electric cars since July. EV deliveries jumped 80% last year to nearly 1.2 million—most of them to ride-hailing services. But volume is likely to plateau in 2019. And because further cuts in incentives are coming next year, sales of China’s so-called “new-energy vehicles” could stall again in 2020.

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